ACCA – Association of Chartered Certified Accountants — Questions and Answers

Question 1: According to IAS 16, which cost elements can be capitalized as part of property, plant and equipment (PPE)?

Purchase price only, excluding taxes
Purchase price plus all subsequent maintenance costs
Purchase price, directly attributable costs, and initial dismantling estimates (Correct answer)
All costs incurred before and after the asset is in use

Correct answer: Purchase price, directly attributable costs, and initial dismantling estimates

IAS 16 allows capitalization of the purchase price, costs directly attributable to bringing the asset to working condition, and the initial estimate of dismantling costs.

Question 2: Which of the following is an example of a current liability?

Trade payables (Correct answer)
Mortgage
Equipment lease
Long-term loan

Correct answer: Trade payables

Trade payables are current liabilities representing amounts owed by a company to its suppliers for goods or services purchased on credit. They are classified as current because they are typically due for payment within one year or the operating cycle of the business.

Question 3: Which of the following best describes the primary objective of an external audit?

To assess the efficiency of management's operations
To detect all fraud within the organization
To prepare financial statements on behalf of management
To express an opinion on whether financial statements give a true and fair view (Correct answer)

Correct answer: To express an opinion on whether financial statements give a true and fair view

The external auditor's primary objective is to express an opinion on whether the financial statements present a true and fair view in accordance with the applicable financial reporting framework.

Question 4: What fiduciary duty applies to financial planning?

Follow the firm's sales targets above all
Act in the client's best interest with loyalty, care, and full disclosure (Correct answer)
Maximize the advisor's commission
Recommend the most expensive products

Correct answer: Act in the client's best interest with loyalty, care, and full disclosure

Fiduciary duty requires acting in the client's best interest with loyalty, care, and full disclosure of all material facts.

Question 5: What continuing education requirement supports portfolio management competence?

Initial licensure is sufficient
Education is only needed when seeking promotion
Ongoing education in regulatory changes, market developments, and best practices (Correct answer)
Read financial news occasionally

Correct answer: Ongoing education in regulatory changes, market developments, and best practices

Financial markets, regulations, and best practices evolve constantly, requiring ongoing education for competent practice.

Question 6: How should conflicts of interest be managed in tax strategies?

Conflicts are unavoidable and need not be disclosed
Identify, disclose, and mitigate all actual and potential conflicts of interest (Correct answer)
Self-assessment of conflicts is sufficient
Conflicts only matter in large transactions

Correct answer: Identify, disclose, and mitigate all actual and potential conflicts of interest

All actual and potential conflicts of interest must be identified, disclosed to clients, and mitigated to maintain trust and compliance.

Question 7: Under ISA 530, which sampling method gives every item in the population an equal chance of selection?

Stratified sampling
Random sampling (Correct answer)
Systematic sampling
Haphazard sampling

Correct answer: Random sampling

Random sampling ensures that every item in the population has an equal probability of being selected, making it a statistically valid method under ISA 530.

Question 8: What is the key distinction between 'finance leases' and 'operating leases' under IFRS 16?

Finance leases apply only to equipment; operating leases apply to property
Operating leases transfer ownership; finance leases do not
IFRS 16 eliminates the distinction; lessees recognize a right-of-use asset for all leases (Correct answer)
Finance leases must be capitalized but operating leases remain off-balance sheet

Correct answer: IFRS 16 eliminates the distinction; lessees recognize a right-of-use asset for all leases

IFRS 16 removed the lessee distinction between finance and operating leases, requiring recognition of a right-of-use asset and lease liability for almost all leases.

Question 9: What continuing education requirement supports risk assessment competence?

Ongoing education in regulatory changes, market developments, and best practices (Correct answer)
Initial licensure is sufficient
Read financial news occasionally
Education is only needed when seeking promotion

Correct answer: Ongoing education in regulatory changes, market developments, and best practices

Financial markets, regulations, and best practices evolve constantly, requiring ongoing education for competent practice.

Question 10: What is the primary role of an audit committee within a company's corporate governance structure?

Overseeing financial reporting and internal controls (Correct answer)
Approving major capital expenditures
Managing investor relations
Setting executive pay

Correct answer: Overseeing financial reporting and internal controls

The audit committee is responsible for overseeing the integrity of financial reporting, internal controls, and the relationship with external auditors.

Question 11: Under the 'comply or explain' regime in corporate governance, what are companies required to do?

Either follow code provisions or explain why they have not (Correct answer)
Comply with rules only if they are a listed company
Comply with all governance code provisions without exception
Explain all governance decisions to regulators annually

Correct answer: Either follow code provisions or explain why they have not

The 'comply or explain' approach requires companies to follow the governance code or provide a clear explanation to shareholders for any departure.

Question 12: Which of the following best describes 'integrated reporting' as promoted by the IIRC?

A system of combining tax and audit reports
Reporting that integrates management accounts with statutory accounts
Combining financial and non-financial information to show value creation over time (Correct answer)
Reporting that integrates the financials of all subsidiaries into one statement

Correct answer: Combining financial and non-financial information to show value creation over time

Integrated reporting, as defined by the IIRC, combines financial and non-financial information to provide a holistic picture of how an organization creates value over time.

Question 13: Under IFRS 9, into which three categories are financial assets classified?

Held-to-maturity, available-for-sale, and trading
Short-term, long-term, and derivative
Amortized cost, fair value through other comprehensive income (FVOCI), and fair value through profit or loss (FVTPL) (Correct answer)
Debt, equity, and hybrid instruments

Correct answer: Amortized cost, fair value through other comprehensive income (FVOCI), and fair value through profit or loss (FVTPL)

IFRS 9 classifies financial assets into amortized cost, FVOCI, and FVTPL based on the entity's business model and the contractual cash flow characteristics.

Question 14: What is the auditor's primary response when significant doubt exists about an entity's ability to continue as a going concern?

Issue an adverse opinion immediately
Report the matter directly to the tax authorities
Withdraw from the engagement
Obtain sufficient appropriate audit evidence and evaluate the adequacy of disclosures in the financial statements (Correct answer)

Correct answer: Obtain sufficient appropriate audit evidence and evaluate the adequacy of disclosures in the financial statements

Under ISA 570, when going concern doubt exists, the auditor must gather sufficient evidence and evaluate whether the entity's disclosures about the uncertainty are adequate before determining the appropriate opinion.

Question 15: What is the purpose of a 'statement of changes in equity' in IFRS financial statements?

To disclose the fair value changes in available-for-sale assets
To summarize cash flows from financing activities
To reconcile the opening and closing balances of all equity components (Correct answer)
To show dividends paid to shareholders during the year

Correct answer: To reconcile the opening and closing balances of all equity components

The statement of changes in equity reconciles the opening and closing balances for each component of equity, showing all movements including profit, other comprehensive income, and transactions with owners.

Question 16: How should conflicts of interest be managed in client relations?

Conflicts are unavoidable and need not be disclosed
Conflicts only matter in large transactions
Self-assessment of conflicts is sufficient
Identify, disclose, and mitigate all actual and potential conflicts of interest (Correct answer)

Correct answer: Identify, disclose, and mitigate all actual and potential conflicts of interest

All actual and potential conflicts of interest must be identified, disclosed to clients, and mitigated to maintain trust and compliance.

Question 17: Under IAS 36, what is an 'impairment loss' on an asset?

The difference between cost and accumulated depreciation
The excess of carrying amount over recoverable amount (Correct answer)
The excess of recoverable amount over carrying amount
The fair value less replacement cost

Correct answer: The excess of carrying amount over recoverable amount

An impairment loss occurs when an asset's carrying amount exceeds its recoverable amount (the higher of fair value less costs to sell and value in use).

Question 18: How should risk be assessed in financial planning?

Ignore risk for aggressive growth
Evaluate risk tolerance, capacity, time horizon, and investment objectives systematically (Correct answer)
Risk assessment is only needed for retirees
Use a one-size-fits-all risk profile

Correct answer: Evaluate risk tolerance, capacity, time horizon, and investment objectives systematically

Comprehensive risk assessment considers tolerance, capacity, time horizon, and objectives to create appropriate strategies.

Question 19: What continuing education requirement supports financial planning competence?

Education is only needed when seeking promotion
Read financial news occasionally
Ongoing education in regulatory changes, market developments, and best practices (Correct answer)
Initial licensure is sufficient

Correct answer: Ongoing education in regulatory changes, market developments, and best practices

Financial markets, regulations, and best practices evolve constantly, requiring ongoing education for competent practice.

Question 20: Under IAS 21, how are foreign currency monetary items translated at the balance sheet date?

At the historical rate when the transaction was initially recorded
At the closing (spot) rate at the balance sheet date (Correct answer)
At the average rate for the reporting period
At the forward rate contracted for settlement

Correct answer: At the closing (spot) rate at the balance sheet date

IAS 21 requires monetary items (such as receivables and payables in foreign currency) to be retranslated at the closing rate at each balance sheet date.

Question 21: What is the primary difference between a 'two-tier' board structure and a 'unitary' board structure?

Two-tier boards are required under US law
Unitary boards are only used in private companies
Two-tier boards separate supervisory and management boards into distinct bodies (Correct answer)
Two-tier boards have more non-executive directors

Correct answer: Two-tier boards separate supervisory and management boards into distinct bodies

A two-tier structure separates the supervisory board (governance oversight) from the management board (operations), common in Germany and the Netherlands.

Question 22: How should risk be assessed in client relations?

Risk assessment is only needed for retirees
Use a one-size-fits-all risk profile
Ignore risk for aggressive growth
Evaluate risk tolerance, capacity, time horizon, and investment objectives systematically (Correct answer)

Correct answer: Evaluate risk tolerance, capacity, time horizon, and investment objectives systematically

Comprehensive risk assessment considers tolerance, capacity, time horizon, and objectives to create appropriate strategies.

Question 23: What regulatory compliance requirement applies to risk assessment?

Compliance is only needed for publicly traded companies
Regulations are optional for small practices
Full compliance with all applicable federal, state, and industry regulations (Correct answer)
Self-regulation is sufficient

Correct answer: Full compliance with all applicable federal, state, and industry regulations

Full regulatory compliance is mandatory regardless of practice size, ensuring market integrity and client protection.

Question 24: What is 'tolerable misstatement' in the context of audit sampling?

The amount of misstatement the auditor will not report to management
The level below which all misstatements are deemed immaterial
The maximum monetary error in a population that the auditor is willing to accept (Correct answer)
The maximum error the auditor is willing to accept before reducing the sample size

Correct answer: The maximum monetary error in a population that the auditor is willing to accept

Tolerable misstatement is the maximum monetary error in a population that the auditor is willing to accept and still conclude that the audit objective has been achieved.

Question 25: Which costing method allocates overheads based on activities?

Marginal costing
Process costing
Activity-based costing (Correct answer)
Absorption costing

Correct answer: Activity-based costing

Activity-based costing (ABC) is a method that identifies specific activities performed in an organization and assigns costs to products or services based on the actual consumption of resources by those activities. This approach provides a more accurate allocation of overheads compared to traditional methods, leading to better cost control and pricing decisions.

Question 26: What regulatory compliance requirement applies to estate planning?

Regulations are optional for small practices
Self-regulation is sufficient
Compliance is only needed for publicly traded companies
Full compliance with all applicable federal, state, and industry regulations (Correct answer)

Correct answer: Full compliance with all applicable federal, state, and industry regulations

Full regulatory compliance is mandatory regardless of practice size, ensuring market integrity and client protection.

Question 27: Which of the following taxes is considered indirect?

Personal income tax
Value-added tax (VAT) (Correct answer)
Corporate income tax
Capital gains tax

Correct answer: Value-added tax (VAT)

Value-added tax (VAT) is considered an indirect tax because it is levied on goods and services at each stage of production and distribution, but ultimately borne by the final consumer. Unlike direct taxes such as income tax, it is not directly imposed on an individual's or company's income or profits.

Question 28: What regulatory compliance requirement applies to tax strategies?

Regulations are optional for small practices
Compliance is only needed for publicly traded companies
Full compliance with all applicable federal, state, and industry regulations (Correct answer)
Self-regulation is sufficient

Correct answer: Full compliance with all applicable federal, state, and industry regulations

Full regulatory compliance is mandatory regardless of practice size, ensuring market integrity and client protection.

Question 29: Which of the following is NOT typically considered a responsibility of the board of directors?

Day-to-day operational management (Correct answer)
Ensuring adequate internal controls
Approving major transactions
Setting strategic direction

Correct answer: Day-to-day operational management

Day-to-day operational management is delegated to executive management, while the board focuses on strategy, oversight, and governance.

Question 30: What is the 'fair value hierarchy' under IFRS 13, and which level represents the most reliable fair value inputs?

Level 2 — observable inputs other than Level 1 prices
Level 3 — unobservable inputs developed by management
Level 1 — quoted prices in active markets for identical assets (Correct answer)
All levels are equally reliable under IFRS 13

Correct answer: Level 1 — quoted prices in active markets for identical assets

IFRS 13 establishes a three-level hierarchy for fair value measurement; Level 1 (quoted market prices) is the most reliable as it uses observable market data directly.

Question 31: What fiduciary duty applies to risk assessment?

Follow the firm's sales targets above all
Maximize the advisor's commission
Recommend the most expensive products
Act in the client's best interest with loyalty, care, and full disclosure (Correct answer)

Correct answer: Act in the client's best interest with loyalty, care, and full disclosure

Fiduciary duty requires acting in the client's best interest with loyalty, care, and full disclosure of all material facts.

Question 32: What is a conflict of interest in professional accounting?

Disagreement between colleagues
Errors in financial reporting
When personal interests clash with professional duties (Correct answer)
Competition between two firms

Correct answer: When personal interests clash with professional duties

A conflict of interest arises when a professional accountant's personal interests, relationships, or other duties could improperly influence their professional judgment or actions. This situation can compromise objectivity and integrity, leading to a perception of bias or unfairness. Accountants must identify and manage such conflicts to ensure they act in the best interest of their clients or employers.

Question 33: In a business organization, what is the primary role of management?

Ensuring compliance with tax laws
Setting accounting policies
Recording financial transactions
Formulating business strategies (Correct answer)

Correct answer: Formulating business strategies

The primary role of management is to provide direction and leadership, which includes formulating comprehensive business strategies. These strategies guide decision-making, resource allocation, and overall organizational performance to achieve the company's long-term objectives and ensure sustainable growth.

Question 34: Under IAS 10, which of the following is classified as an 'adjusting event after the reporting period'?

A major acquisition announced after the year-end
A catastrophic fire that destroyed assets after the year-end
Announcement of a new dividend after the year-end
Discovery of a fraud that existed at the balance sheet date (Correct answer)

Correct answer: Discovery of a fraud that existed at the balance sheet date

Discovery of a fraud or error existing at the balance sheet date is an adjusting event, as it provides evidence of a condition that existed at the reporting date.

Question 35: According to ACCA's governance principles, what is the purpose of a remuneration committee?

To approve dividend payments to shareholders
To set salaries for all company employees
To determine fees for external advisors
To set executive director pay independently of management influence (Correct answer)

Correct answer: To set executive director pay independently of management influence

The remuneration committee sets executive pay packages independently, helping to prevent executives from setting their own excessive remuneration.

Question 36: How should risk be assessed in estate planning?

Use a one-size-fits-all risk profile
Evaluate risk tolerance, capacity, time horizon, and investment objectives systematically (Correct answer)
Ignore risk for aggressive growth
Risk assessment is only needed for retirees

Correct answer: Evaluate risk tolerance, capacity, time horizon, and investment objectives systematically

Comprehensive risk assessment considers tolerance, capacity, time horizon, and objectives to create appropriate strategies.

Question 37: What regulatory compliance requirement applies to financial planning?

Regulations are optional for small practices
Full compliance with all applicable federal, state, and industry regulations (Correct answer)
Compliance is only needed for publicly traded companies
Self-regulation is sufficient

Correct answer: Full compliance with all applicable federal, state, and industry regulations

Full regulatory compliance is mandatory regardless of practice size, ensuring market integrity and client protection.

Question 38: Under IAS 2, how should inventories be measured on the balance sheet?

At net realizable value only
At the lower of cost and net realizable value (Correct answer)
At cost only
At the higher of cost and net realizable value

Correct answer: At the lower of cost and net realizable value

IAS 2 requires inventories to be measured at the lower of cost and net realizable value, applying the prudence concept to avoid overstating assets.

Question 39: How should conflicts of interest be managed in investment analysis?

Conflicts are unavoidable and need not be disclosed
Self-assessment of conflicts is sufficient
Identify, disclose, and mitigate all actual and potential conflicts of interest (Correct answer)
Conflicts only matter in large transactions

Correct answer: Identify, disclose, and mitigate all actual and potential conflicts of interest

All actual and potential conflicts of interest must be identified, disclosed to clients, and mitigated to maintain trust and compliance.

Question 40: In corporate governance, what does the term 'independence' mean when applied to a non-executive director (NED)?

The NED has no material relationships that could impair judgment (Correct answer)
The NED is not paid for their services
The NED holds shares in the company
The NED works full-time for the company

Correct answer: The NED has no material relationships that could impair judgment

An independent NED is one who has no relationships or circumstances that could affect their ability to exercise objective, unbiased judgment.

Question 41: Which of the following best describes 'control risk'?

The risk that the auditor's sampling fails to detect a misstatement
The risk that a misstatement will not be prevented or detected by the entity's internal controls (Correct answer)
The overall risk that a material misstatement reaches the financial statements
The susceptibility of a transaction to error before controls are applied

Correct answer: The risk that a misstatement will not be prevented or detected by the entity's internal controls

Control risk is the risk that a material misstatement that could occur will not be prevented, or detected and corrected, on a timely basis by the entity's internal control.

Question 42: What is the 'conceptual framework' in IFRS and what is its primary purpose?

A legal document that overrides all individual standards
A compliance checklist issued by national regulators
A list of approved accounting methods for each industry
A guide that underpins the development of IFRS standards and assists preparers in applying them (Correct answer)

Correct answer: A guide that underpins the development of IFRS standards and assists preparers in applying them

The IFRS Conceptual Framework provides the underlying concepts that guide the IASB in developing standards and helps preparers develop consistent accounting policies.

Question 43: What fiduciary duty applies to client relations?

Maximize the advisor's commission
Recommend the most expensive products
Follow the firm's sales targets above all
Act in the client's best interest with loyalty, care, and full disclosure (Correct answer)

Correct answer: Act in the client's best interest with loyalty, care, and full disclosure

Fiduciary duty requires acting in the client's best interest with loyalty, care, and full disclosure of all material facts.

Question 44: How should risk be assessed in tax strategies?

Risk assessment is only needed for retirees
Ignore risk for aggressive growth
Evaluate risk tolerance, capacity, time horizon, and investment objectives systematically (Correct answer)
Use a one-size-fits-all risk profile

Correct answer: Evaluate risk tolerance, capacity, time horizon, and investment objectives systematically

Comprehensive risk assessment considers tolerance, capacity, time horizon, and objectives to create appropriate strategies.

Question 45: Under IAS 8, what is the correct treatment when an entity changes an accounting policy?

Apply the change prospectively from the current period only
Apply the change from the beginning of the following financial year
Apply the change retrospectively, restating prior periods unless impracticable (Correct answer)
Disclose the change but no restatement is required

Correct answer: Apply the change retrospectively, restating prior periods unless impracticable

IAS 8 requires that changes in accounting policy be applied retrospectively, restating comparative figures as if the new policy had always been applied, unless impracticable.

Question 46: Which IFRS standard governs the accounting for income taxes, including deferred tax?

IAS 37
IAS 19
IAS 12 (Correct answer)
IFRS 9

Correct answer: IAS 12

IAS 12 Income Taxes prescribes the accounting treatment for current and deferred income taxes, using the temporary difference approach.

Question 47: What should an ACCA member do if asked to engage in a transaction that violates professional ethics?

Refuse the engagement and report it if necessary (Correct answer)
Seek to adjust the transaction to appear ethical
Consult a legal advisor
Comply to maintain client relationships

Correct answer: Refuse the engagement and report it if necessary

An ACCA member has a professional and ethical obligation to uphold the fundamental principles of ethics, including integrity and professional behavior. Engaging in a transaction that violates these principles would compromise their professional standing and potentially lead to disciplinary action. Therefore, the member must refuse the engagement and, depending on the severity and nature of the violation, consider reporting it to the appropriate authorities or professional body.

Question 48: What regulatory compliance requirement applies to regulatory compliance?

Regulations are optional for small practices
Self-regulation is sufficient
Compliance is only needed for publicly traded companies
Full compliance with all applicable federal, state, and industry regulations (Correct answer)

Correct answer: Full compliance with all applicable federal, state, and industry regulations

Full regulatory compliance is mandatory regardless of practice size, ensuring market integrity and client protection.

Question 49: What is the 'effective interest method' used for under IFRS financial reporting?

Determining the fair value of derivative instruments
Amortizing the premium or discount on financial instruments to reflect true interest cost (Correct answer)
Calculating depreciation on PPE using interest-equivalent rates
Allocating dividends to shareholders over time

Correct answer: Amortizing the premium or discount on financial instruments to reflect true interest cost

The effective interest method allocates interest income or expense over the relevant period, spreading any discount or premium on a financial instrument at a constant rate.

Question 50: In the UK Corporate Governance Code, what principle governs the relationship between a company's board and its shareholders?

Remuneration
Engagement (Correct answer)
Accountability and audit
Leadership

Correct answer: Engagement

The UK Corporate Governance Code's 'Engagement' principle addresses how the board should maintain dialogue with shareholders and stakeholders.

ACCA – Association of Chartered Certified Accountants

The ACCA qualification is a globally recognised accounting and finance credential covering financial reporting, corporate governance, taxation, audit, and strategic management. Exams span three levels: Applied Knowledge, Applied Skills, and Strategic Professional, all with a 50% passing threshold.

Questions

120 min

Time Limit

50%

To Pass

Checking for saved progress...

Exam Rules

You can skip questions and return to them later
Flag questions for review before submitting
No feedback shown until you submit the entire exam
Unanswered questions count as wrong — answer everything
10 pretest questions are mixed in and don't affect your score
Timer auto-submits when time runs out
Your progress is auto-saved every 30 seconds